Ramco, the Scottish exploration group, said yesterday the testing of its second gas well off the Kinsale coastline "substantially exceeded expectations".

The company also announced it had secured an €86.86 million project finance loan with the Bank of Scotland, which enables it to continue the exploration of the Seven Heads gas project.

The well results are a huge boost for Ramco, which recently increased its stake in Seven Heads to 86.5 per cent from 49 per cent after reducing its portfolio in other exploration investments and selling its €165 million share in the Azeri Chirag Gunashi fields offshore Azerbaijan.

According to a company statement, the well produced dry gas rates in excess of 34.3 million cubic feet.

Mr Steve Remp, chairman of Ramco, described the results as a "great result for Ramco, our partners Marathon and above all for Ireland". But he cautioned that the team still had another four wells to go and said the project was "not done yet".

The find is expected to result in greater competition in the market and analysts believe consumer gas prices could drop by 2-3 per cent.

More than half of the Republic's gas requirements are imported at the moment through the former State utility Bord Gáis.

Davy Stockbrokers exploration analyst Mr Job Langbroek said the test results confirmed that Seven Heads was the next generational source for Irish gas.

"The flow rates from this well are extremely important for the future of Irish gas. Seven Heads is clearly a significant development," according to Mr Langbroek.

Ramco reiterated that flows from the production well would reach the Irish market in the last quarter of this year, on target with earlier company predictions.

Ramco operates the Seven Heads field with the US petroleum company Marathon and Norway-based exploration company DNO, which holds a 12.5 per cent stake in the project through its subsidiary, Island Petroleum Development.